Pakistan mulls tax hikes amid IMF negotiations

In Pakistan, discussions are underway regarding potential tax increases in the upcoming budget for the fiscal year 2024-25. One proposal is to raise the withholding tax on cars with engine capacities of 850cc or higher, which has sparked concerns among buyers and sellers. The sluggish car sales, attributed to already high prices, could face further challenges if this hike is implemented. Additionally, there are talks of increasing the advance tax on cash withdrawals from banks by non-filers.

The government is currently in negotiations with the International Monetary Fund (IMF) for a bailout package. As part of the proposed measures, there is a suggestion to raise the withholding tax for non-filers from 0.6 percent to 0.9 percent. If approved, this adjustment could potentially generate an additional revenue of Rs15 billion from non-filers.

Looking ahead to the federal budget for the fiscal year 2024-25, scheduled to be unveiled on June 7, it is projected to have a total expenditure of Rs16,700 billion. A significant portion of this budget, Rs9,700 billion, is allocated for interest and loan repayments, while Rs1,500 billion is set aside for subsidies. The anticipated tax revenue is expected to surpass Rs11,000 billion, with direct taxes contributing Rs5,300 billion, federal excise duty yielding Rs680 billion, sales tax generating over Rs3,850 billion, and customs duty expected to bring in more than Rs1,100 billion.

The proposed tax adjustments in the upcoming budget could have far-reaching implications for both the automotive industry and individuals making cash withdrawals. As Pakistan navigates its economic challenges and seeks financial support from international organizations like the IMF, these fiscal decisions play a crucial role in shaping the country's financial landscape. Stay tuned for further updates on the budget announcement and its impact on various sectors.